Sunday, October 21, 2012

Chuck Schumer makes a good point

"When Republicans say the first thing you do when you do deficit reduction is reduce rates, it would be like Democrats saying the first thing you do when you do deficit reduction is provide free Medicare at age 55. We’d like to do that! But it won’t bring the deficit down. That’s for sure.

"It just makes no sense and I’m surprised so many have swallowed it for so long. If your number one goal is deficit reduction, you don’t start out by lowering the rates. You don’t need a PhD in economics to understand that."

UPDATE: Okay, it's true that lowering the rates may lessen the magnitude both of the existing distortions in the tax system, and of political incentives to create more loopholes via exclusion or deferral. But as an economic matter (contrary to the mantra of "broaden the base, lower the rates") a broader base and a higher rate are complements, not substitutes.

About Me

I am the Wayne Perry Professor of Taxation at New York University Law School. My research mainly emphasizes tax policy, government transfers, budgetary measures, social insurance, and entitlements reform. My most recent books are (1) Decoding the U.S. Corporate Tax (2009) and (2) Taxes, Spending, and the U.S. Government's March Toward Bankruptcy (2006). My other books include Do Deficits Matter? (1997), When Rules Change: An Economic and Political Analysis of Transition Relief and Retroactivity (2000), Making Sense of Social Security Reform (2000), Who Should Pay for Medicare? (2004), Taxes, Spending, and the U.S. Government's March Towards Bankruptcy (2006), Decoding the U.S. Corporate Tax (2009), and Fixing the U.S. International Tax Rules (forthcoming). I am also the author of a novel, Getting It. I am married with two children (boys aged 16 and 19) as well as four (!) cats. For my wife Pat's quilting blog, see Patwig’s Blog.